Question

Management of Modugno Corporation is considering whether to
purchase a new model 370 machine costing $441,000 or a new model
240 machine costing $387,000 to replace a machine that was
purchased 7 years ago for $429,000. The old machine was used to
make product M25A until it broke down last week. Unfortunately, the
old machine cannot be repaired.
Management has decided to buy the new model 240 machine. It has
less capacity than the new model 370 machine, but its capacity is
sufficient to continue making product M25A.
Management also considered, but rejected, the alternative of simply
dropping product M25A. If that were done, instead of investing
$387,000 in the new machine, the money could be invested in a
project that would return a total of $430,000.

In making the decision to buy the model 240 machine rather than the
model 370 machine, the sunk cost was: